circular flow of income

• Inner flow- firms pay households wages and salaries, dividends on shares, interest and rent these are in return for factors of production Y. households pay money to domestic firms for goods and services C.
• Withdrawals- net saving S saving that households put aside for the future are normally deposited in financial institutions we have to subtract from saving any borrowing or drawing on past savings.  Net taxes T households paying money to the government, benefits are known as transfer payments and must be taken away. Import expenditure M, households spend income on imported goods and services therefore the money flows abroad.
• Injections- Investment I from financial institutions such as loans or shares they may invest in plant or equipment or simply spending on stocks of inputs. Government purchases G when the government spends money on goods or services such as roads, hospitals or schools. Export expenditure X residents abroad by goods or services.